How Take-Two Interactive Hopes to Up Its Game

Next Monday, Take-Two Interactive (NASDAQ: TTWO  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed kneejerk reaction to news that turns out to be exactly the wrong move.

The video game industry has been a tough place to be in recent years, as the growth of low-priced mobile gaming, and other alternatives to traditional console games, have threatened the business models of Take-Two and its peers. But with new upgraded consoles coming out, can Take-Two take full advantage of a gaming renaissance? Let's take an early look at what's been happening with Take-Two Interactive over the past quarter, and what we're likely to see in its quarterly report.

Stats on Take-Two Interactive

 

 

Analyst EPS Estimate

$0.23

Year-Ago EPS

($0.60)

Revenue Estimate

$280.36 million

Change From Year-Ago Revenue

89%

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Will Take-Two Interactive's earnings reach a new high score this quarter?
Analysts have been a bit pessimistic about Take-Two Interactive's near-term earnings prospects, having cut their estimates on the March quarter by $0.02 per share, and making a more dramatic cut of $0.16 per share for the current quarter. But the stock has done very well, rising more than 25% since early February.

The big news for Take-Two this quarter was the March release of its BioShock Infinite game. With favorable reviews, the game has sold extremely well, and analysts now expect the game to sell about 4.5 million copies in its first year.

But, in general, the video game industry continues to struggle. Despite new consoles expected in the PlayStation and Xbox line, the new Wii last November failed to generate much new buzz. Also, even though Take-Two rival Activision Blizzard (NASDAQ: ATVI  ) beat earnings estimates when it reported earlier this week, it suffered substantial losses in customer counts for its core World of Warcraft subscriber-based game, and shares actually fell following the release.

Moreover, the fight for the best game prospects is ultra-competitive. The recent victory of Electronic Arts (NASDAQ: EA  ) in gaining high-profile exclusive rights to produce Star Wars-themed games for Disney represents a major lost opportunity for Take-Two.

Still, Take-Two has its Grand Theft Auto V release later this year to count on for another boost of revenue. The company's delay of the release until September raised eyebrows when it was first announced in January, but given the performance of BioShock Infinite, the move was likely a smart one to space out its blockbuster releases.

In Take-Two's report, look for any signs of possible consolidation within the video game industry. At some point, game manufacturers should probably start combining forces to stand up to alternatives like mobile gaming. Otherwise, Take-Two will have to bet everything on the possibility that new game consoles will rescue an industry in decline.

While Take-Two is an interesting play in console gaming, investors following the gaming sector would do well to also keep tabs on Electronic Arts. We can help. The Motley Fool's special report breaks down the risks and opportunities facing the company to help you decide if EA is right for your portfolio. Click here to get your copy now.

Click here to add Take-Two Interactive to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


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